Canada govt advisors call for deeper trade ties, start-up support

Reuters Staff

3 Min Read

The moon rises behind the CN Tower, a Canadian landmark, and the skyline in Toronto, Canada November 24, 2015.Mark Blinch/File Photo

OTTAWA (Reuters) - A Canadian government advisory group on Monday released a number of recommendations to boost the economy, including strengthening the country's trade links and establishing funds to help smaller companies raise capital in order to scale up.

The group also advised taking a targeted sector approach to improving growth, highlighting the agriculture and food industry as one that could be better developed to its full potential.

The proposals could be incorporated into the government's next budget, expected to be released in the coming months.

Noting the anti-trade sentiment that has been increasing around the world, the report recommended that Canada modernize its trading relationship within North America by harmonizing standards and regulations, and develop stronger links with fast-growing economies, particularly in Asia.

Although the North American Free Trade Agreement is on course to be renegotiated following the election of U.S. President Donald Trump, the report advised that both the government and private sector push for better integration of Canadian and U.S. businesses. Canada sends about three-quarters of its exports to the United States.

To help small- and medium-sized companies expand, the council recommended creating a government-financed fund that would provide C$1 (76 U.S. cents) for every C$2 of qualified private capital in exchange for unsecured debt or minority equity.

Companies would have to demonstrate high growth and export potential. The council recommended reallocating funds from existing programs.

The government should also encourage the private sector to establish a growth fund of pre-committed capital from financial institutions that would go to high-growth businesses through minority equity or loans.

With certain sectors of the economy holding "significant untapped potential", the report proposed launching a pilot program in the agriculture and food sector that would identify barriers to growth and come up with concrete policy solutions.

For example, Canada could increase its agriculture and food exports by setting a multi-year target.

To help workers deal with the changes in the labor market brought on by technological advances, the council recommended establishing a non-government organization to operate as a laboratory for skills development.

It was the second round of recommendations released by the economic advisory council that was appointed by Finance Minister Bill Morneau, who said he welcomed the recommendations.

Last year's report, the council's first, recommended the creation of an infrastructure bank, which the government subsequently said it would set up.